It’s been a bumpy ride for small businesses through COVID-19. Government pandemic relief assistance has provided a lifeline for many. Below are some of the federal and state programs that remain to benefit business owners.
The Employee Retention Tax Credit (ERTC) provides an opportunity for businesses still suffering economic effect from the pandemic. It is a refundable tax credit designed to help employers keep employees on their payroll and to help with recovery from government-mandated business closures during the pandemic. The credit for 2020 and 2021 is calculated differently.
In guidance issued by the Internal Revenue Service April 2, eligible employers may “claim a refundable tax credit against the employer share of Social Security tax equal to 70 percent of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021.” Maximum employee retention credit is $7,000 for each employee per quarter, or a total of $14,000 per employee in the first two calendar quarters of 2021.
For 2020, eligible businesses who had a 50 percent or more drop in business may receive a maximum up to $5,000 per employee. The credit equals 50 percent of wages paid after March 12, 2020 and prior to Jan. 1, 2021.
In order to take full advantage of the ERTC and to receive accurate and individualized information, businesses and nonprofits are strongly encouraged to seek assistance from their certified public accountant or other tax professional.
Administered through the Small Business Administration, the COVID-19 Economic Injury Disaster Loan is commonly referred to as an EIDL loan. Small business owners, agricultural businesses and nonprofits may apply for loans up to $500,000. Proceeds must be used for capital and operating expenses such as rent, fixed debt payments, continuation of health care benefits and utilities. Payment is due over 30 years with a fixed interest rate of 3.75 percent for businesses and 2.75 percent for nonprofits. The first payment may be delayed for 18 months.
Business owners, independent contractors, self-employed and gig workers are among those eligible to apply for Pandemic Unemployment Assistance (PUA) through California’s Employment Development Department. As part of federal assistance, PUA is designed to help Californians whose services have been reduced or are out of business.
The Families First Coronavirus Response Act (FFCRA) was created to provide help for employees and their households affected by the pandemic through emergency paid sick live.
Starting Jan. 1, 2021, employers with fewer than 500 employees were able to receive up to $5,000 per employee in tax credits when they agreed to voluntarily cover emergency paid sick leave costs. Under the American Rescue Plan Act of 2021 (ARPA), eligibility for employer tax credits was recently extended through Sept. 30, 2021.
Employers should seek assistance from their certified public accountant and human resources professional for specifics as it applies to their individual workplace.
The Small Business Development Center at CSUB is one of five service centers within the University of California, Central California SBDC Regional Network. It assists small business owners in Kern, Inyo and Mono counties by providing free consulting, small business training and research.
More information can be found in the free weekly one-hour “Webinar Wednesday” series, Managing Your Small Business through the Pandemic. Topics include pandemic relief updates on available federal, state, and local funding options, tax credit programs and employee programs. For more information go www.csubsbdc.com
Kelly Bearden is the director of the Small Business Development Center at Cal State Bakersfield.